Growth factors for services sector industries in Australia


Write essay discussing the topic what factors will impact this growth over the next 5 years and why are services so important to world economies ?. Also please focus on factors that have led to the growth in demand for services in developed nations such as Australia.



In this assignment major factor which leads to increase the demand for the service in a developed nation such as Australia and what are the factors that impact the growth over the next five years has been mentioned. Importance of the services to the global level has also been detailed in this assignment. 


In order to complete this assignment the major difference between goods and services has been highlighted. The major difference between goods and services are goods is always present in a physical form that is it is tangible. Whereas services are always intangible. Services required less cost of inventory management whereas goods required a high cost of inventory management.  Goods have the result of the manufacturing process which gives an output which has physical dimensions. Whereas services don't have a physical dimension.
Goods can be produced and can be stored for the longer period of time. Whereas services are created as per the customer needs and it cannot be stored. Although many services industry is storing their services such as a hospital, hotel and so on. In hospital medicine and other medical equipment are stored in a way to provide the services to the patient. But the cost of inventory management is less than the cost of inventory management of the physical goods (Tomczak et al., 2018).
Services cannot be weighed or measured whereas good is a tangible output of a process that has physical dimensions. Involvement of customer in regards to services is more than the involvement of customer in regards to goods (Rispoli et al., 2017). 

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Value of the services to the Australian and the whole economy.

Value of the services in almost all the developed nation such as Australia is very important. As it creates the maximum number of the employment in the country and also worldwide.
According to the ABS (Australian Bureau of Statistics) identified that the growth of Australian economy is due to the increase in the service sector. Services sector contribute a lot to the global economy as it uses to generate maximum employment opportunity. From ABS (Australian Bureau of Statistics) report it was found that services sector has resulted to increase the GDP level of the Australian Economy (Francois et al., 2015). 
A standard of living of the people increases by the three times when compared with the 1980s. Which is clearly indicating that manufacturing sectors are been replaced by the services sector industries.

So from the above diagram, it can be concluded that in the overall growth of the economy (GDP) maximum contribution is made by the services sector. Service sector industries contributed 76 percent of the growth in GDP. Which clearly indicates that value of service sector in developing the whole economy is important. As it contributed a maximum number of the employment and also raises the standard of living.
Values of the service sector to the Australian and economy in nutshell are
•    Services sector industries yield more employment in the economy which results in increasing the personal disposable income of the people. Resulting in more saving with banks or spending in other investment which ultimately put a positive impact on the whole economic development. 
•    Services sector industries contribute maximum in GDP growth.
•    Services sector industries dominate the workforce and also provide the above-average earnings as compared to manufacturing or goods based industries.
•    A more new job opportunity has been created by the services sector industries in Australia. It can be shown by the below diagram.
So service sectors play a vital role in developing the economy at the fastest pace of time. As it used to generate a maximum number of the employment in the economy it also yields more GDP that is in GDP maximum contribution is made by the Services sector industries only. 

Growth factors for services sector industries in Australia 

Various factors which led to the growth of services in Australia are hollowing out effect and deregulation, population explosion or increase in the population and so on.

•    Deregulation

The National Bureau of Economic report shows a fundamentally positive effect of deregulation on interest in the vehicle, interchanges, and utility enterprises; it is powerful to different controls for segment or nation particular stuns and for work showcase progression. The essential part of the change is a progression of the section into business sectors. A decrease in section burdens prompts a falling in the markup of costs over small expenditures, and thus to a diminishment in the punishment for extending the capital stock and generation. Be that as it may, privatization doesn't seem to influence venture essentially. Privatization may prompt more productive open doors for privately owned businesses, however, nationalized organizations may over-contribute, either mirroring the weight of lawmakers or on the grounds that chiefs of open endeavors are not compelled by the teach forced by budgetary markets (Schautschick et al., 2016).
So through the deregulation, many developed countries try to set up their service plant in developing countries as the cost of labor and materials are cheap. Which motivated the services sector industries to step into the services sector. As a result, deregulation put a positive impact on the service sector growth (Cloke et al., 2017).

•    Hollowing out effect

Through the hollowing out effect, many developed countries started setting up their services plant in the developing countries due to the low labor cost. Hollowing out effect put the positive impact on the Australian economy in regards to services sector industries. As Australia is the fastest growing country in the world. So do the technological advancement in Australia it attracted many investors to invest in the service sector in Australia because of the ease of the process due to high tech technology (Alexander et al., 2017).
Due to the technological and economic reform many developing and developed countries planned to switch to services sector industries. As hollowing out effect enable the organization and countries to provide the best services to the customer at low and reasonable rate. Through hollowing out effects it is possible to supply services in least and reasonable cost. Hollowing effect affected the manufacturing plant to shift in the developing countries due to cheap labor. Which gave rise to services sector in Australia and other developed nation.

Factors impacting the growth of service sector over coming next 5 years.

Various economic factors which impact the growth of service sector over the next five years are a rise in employment level, increase in the level of living standard, increasing in the GDP and technological advancement.
Due to increase in the employment level and increase in the total GDP growth, it will lead to increase the standard of living which will lead the people to demand more for services as a final result the demand for services increases.
Advancement in the technology also impacts the growth of the service sector as it led to having more competition. Beside these industrial reforms also impact the service sector growth as industrial reform includes the reduction of the protection provided to the small scale services industry. Increase in the per capita income due to increase in employment will also impact the growth of the service sector industries.
In nutshell
Increase in employment level 
Technological advancement 
Change in demand and productivity- for service industry it is important to determine the how much demand has changed over a period of time.
Increasing the level of living standards
Economic reforms- as it impacts the growth of the services sector because the economic reform some time reduces the protection of the small-scale services industry.


In the end, it can be concluded that the service division is a noteworthy piece of the Australian economy, speaking to around 70 for every penny of Australia's (GDP) and utilizing four out of five Australians. Australia is a world-class supplier of a scope of service, for example, proficient services, training and tourism, monetary service, vitality and mining-related services, natural services or environmental services and money related innovation. These are Australia's need areas for enhancing market access in worldwide services exchange change endeavors. Services likewise assume an undeniably imperative part of our universal exchange, with service, sends out developing by a normal of 3.2 for every penny for each annum in the course of the most recent five years. In 2015, add up to exchange services represented 21.3 for each penny of Australia's aggregate exchange products and enterprises, and services trades represented 20.9 for each penny of Australia's aggregate fares.


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Tomczak, T., Reinecke, S., and Kuss, A., 2018. Introduction. In Strategic Marketing (pp. 1-18). Springer Gabler, Wiesbaden.
Rispoli, M. and Tamma, M., 2017. Goods and services, that is, products. Sinergie Italian Journal of Management, 100.
Francois, J., Manchin, M., and Tomberger, P., 2015. Services linkages and the value-added content of trade. The World Economy, 38(11), pp.1631-1649.
Schautschick, P. and Greenhalgh, C., 2016. Empirical studies of trademarks–the existing economic literature. Economics of innovation and new technology, 25(4), pp.358-390.
Cloke, P. and Bell, P., 2017. Deregulation and transport: Market forces in the modern world. Routledge.
Alexander, L. and Eberly, J., 2017. Investment hollowing out. IMF Economic Review, pp.1-26.

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